Painfully, Europeans Ponder Cutback in Wine Industry

By STEPHEN CASTLE

Published: July 4, 2007

Efforts to shore up the European wine industry by tearing out thousands of acres of vineyards and scrapping some subsidies have set the stage for a fierce debate Wednesday as Europeans contemplate the cost of their love affair with the grape.

Vigorous competition from New World producers and complex regulations in Europe have helped create a vast amount of surplus wine, leading also to problems of quality and to increased spending to ease the surplus. To address those problems, the executive arm of the European Union has proposed overhauling the industry by reducing production, cutting subsidies and providing incentives to efficient winemakers.

But winemaking is regarded as part of national cultures in many of the bloc's 27 members, and efforts to reduce the size of the industry have touched raw nerves like few other European proposals.

''This has been one of the most difficult agricultural reforms,'' said Michael Mann, spokesman for the European agricultural commissioner, Mariann Fischer Boel. ''People tend not to get so passionate about fruit and vegetables.''

Though this is partly a result of tradition, it also reflects economic realities. The European Union is the world's leading producer, consumer, exporter and importer of wine.

So members of the executive body, the European Commission, are preparing to defend the interests of their own countries' winemakers and grape growers at a meeting Wednesday that will consider a crucial overhaul proposal for the industry.

The commission has already scaled down its proposal to cut back the wine industry since it offered its first plan just over a year ago. Originally, it envisioned ripping out 400,000 hectares, or 988,000 acres, of vineyards, a figure it has now halved, to 200,000.

The plan also proposes to scrap subsidies for distilling unsold wine into industrial alcohol, one of the main ways it has suggested for absorbing excess European production.

Instead, it would make payments directly to farmers, encouraging them to diversify into other crops, rather than continue to overproduce sometimes poor-quality wine.

The plan, which is expected to cost 1.3 billion euros a year ($1.76 billion), has prompted a fight among countries that expect to benefit from the incentives for diversification -- generally Southern European wine-producing nations like France, Spain and Italy -- and want to maximize their subsidies. Other European Union nations that make less or no wine want to keep as tight control on spending as possible.

Another proposed change would remove current restrictions on successful vineyards, which after 2014 would be able to increase their planting, ''allowing the most efficient producers to optimize the size of their holdings and to operate at the most convenient production scale,'' according to the commission.

Another important change likely to be approved will be a ban on the use of sugar to sweeten or raise the alcohol level of wine. This is likely to encounter opposition from northern producers like Germany and Austria, which are known for their dessert wines.

The proposal would also allow 120 million euros a year, or $163 million, to promote moderate wine drinking.

Whatever happens Wednesday, there is no doubt that many European growers, particularly small ones who produce ordinary table wine, are destined for a period of pain. An impact assessment prepared for the commission acknowledges that planned changes will cause suffering, although it argues that doing nothing would be worse, as overproduction continues to erode prices and reduce farm income.

''In the light of the midterm outlook for the EU-27 wine sector, the no-reform option would lead to increasing surpluses, thereby appearing unsustainable,'' the document said.

It predicted that the commission's proposal would lead to a price drop of about 7 percent in the short term, but would ''ensure a rapid price stabilization over time.'' Doing nothing, it estimated, would result in an 11 percent decrease in prices.

The assessment underlines how much is at stake for the big wine-producing nations. The document projects that in 2009, which it sees as the year with the greatest impact as thousands of acres of vineyards are ripped out, agricultural employment related to winemaking will fall 5.1 percent.

Europe's small wine holdings employ the equivalent of some 1.4 million full-time workers. Half a million larger wine operations, which are not expected to feel the effect of the proposal as much as the smaller ones, employ proportionately fewer workers.

Scrapping subsidies on alcohol distillation could also have an effect on jobs. Italy, France and Spain have 256 distilleries, which process excess wine, and ''some of them would probably close down,'' the document says

The proposal is expected to be decided by the European Union's member nations later this year.

Photos: An oversupply of wine in Europe is intensified by competitive products like the Australian box wine a consumer is buying in Dworp, Belgium. (Photograph by Virginia Mayo/Associated Press); Cabernet franc grapes from a vineyard in the Loire region of France. A proposal would end restrictions on grape growth in successful vineyards. (Photograph by Richard Harbus for The New York Times)